Belgian Finance Minister Steven Vanackere said Monday the rescue of Spanish banks could add to Belgium's indebtedness if it wasn't carried out via the euro zone's new rescue fund. In an interview published in the Belgian daily Le Soir, Mr. Vanackere said Belgium could be made liable for EUR1 billion of the EUR100 billion loan for Spain if, for example, a quarter of the aid package was channelled through the euro zone's current rescue fund, the European Financial Stability Mechanism.

The European Commission last month raised the alarm over Belgium's public debt, which remains high after the fall-out from the financial crisis and its rescue of the Belgian arm of the Franco-Belgian bank Dexia SA (DEXB.BT). But Mr. Vanackere said Belgium would be off the hook in terms of lending if the entire aid went through the new bailout fund, or European Stability Mechanism, which is due to come into force on July 1.

"Belgium will lend nothing (if the ESM is used), it will only give guarantees, so this would have no impact on our debt levels," he told Le Soir. Although the ESM is due to come into force on July 1, its launch could be delayed and it remains unclear how the latest euro-zone bailout will be organized. Mr. Vanackere added that the aid given to Spain could be less than the EUR100 billion agreed over the weekend. "(But) we wanted to show markets that we were ready to do all its takes to recapitalize the Spanish banks."

The leader of a Belgian Islamist group, Sharia4Belgium, was arrested on Thursday for posting an Internet video urging attacks on non-Muslims after a woman was detained in Brussels for wearing a face veil. Fouad Belkacem, also known as Abu Imran, was detained at his home in the northern Belgian city of Antwerp and remanded in custody on suspicion of breaking anti-discrimination laws and inciting violence. “He posted a video message on YouTube in which he called on his brothers and sisters to fight against non-believers,” said a spokesman for the Antwerp prosecutor. Last week protesters threw metal barriers and bins at a police station following the arrest of a Muslim woman for refusing to remove her face veil.

Women in Belgium risk a maximum fine of 150 Euros ($190) if they wear a full face veil in public. Belgium and France banned the wearing of full veils in public last year. In an emailed statement, Sharia4Belgium said: “The arrest of Abu Imran will bring more people to our side.”Belkacem is due to appear in court next week. On Tuesday, Belgian right-wingers offered to pay a 250 Euros ($310) bounty to anyone who reports a veiled woman to police, in the wake of the face veil riots in Brussels.

Filip Dewinter, a senior figure within Vlaams Belang, a right-wing party, told Reuters the riots had made police apprehensive about enforcing the burqa ban and that the payment should put pressure on authorities to further enforces it. “It’s a textile prison for the women who have to live under it,” he said. A Brussels police spokesman said he was unaware of the money being offered, but said any officer who sees a woman wearing a niqab would issue a penalty. “When someone is breaking the law we always have to intervene, demonstrations or no, the niqab is prohibited,” he said. Dewinter said he was not aware how many people had already responded to the offer of a bounty. A spokeswoman for Belgium’s federal police said the legality of the bounty was a question for the judiciary, but if someone felt insulted by it they could file a complaint with the police. Police in Belgium are investigating last week’s riots and arrested 13 members of the Islamist group Sharia4Belgium on Sunday, the police spokesman said.

The European Commission Wednesday urged Belgium to keep a tight rein on its public finances in order to meet its deficit targets for this year and push through key reforms to improve competitiveness. In a report, the EU's executive said some of the challenges Belgium faces have become "more acute" and that the country potentially needs to implement extra measures to meet EU deficit targets for this year and to scale back its high public debt. The commission said it welcomes some of the efforts undertaken by the new Belgian government, which took office last December after a protracted political stalemate, but made clear those structural reforms in the labour market, such as indexation, and pensions didn't go far enough.

The report expressed concern about "considerable challenges" in Belgium's financial system, which could endanger efforts to bring public finances into order. Banks are still being restructured following the financial crisis of 2008 and the high level of state guarantees for the financial sector and the possibility of future recapitalizations pose "high risks," given the "strong interplay" between the sovereign and the banking sector, it said. The commission said Belgium's budget program to reduce its budget deficit is "broadly in line" with its own recommendations, but it warned that "further measures" couldn't be ruled out, as the economy is expected to perform worse than expected. Belgium has pledged to cut its deficit to 2.8% of gross domestic product this year from 3.8% in 2011 and risks an EU fine if its deficit doesn't fall to at least 3% of GDP. In the report, which is part of a set of recommendations for policy-makers across the EU, the commission singled out a number of weaknesses, including Belgium's automatic system of indexing wages to inflation. It said there has been "no progress with regard to reforming the system of wage bargaining and wage indexation," a key recommendation set out in last year's policy recommendations. Belgium's indexation scheme is the most rigid in Europe, but the six-party coalition government of Prime Minister Elio di Rupo promised to defend it in the government program it set out when the government took office.

Indexation is one of the issues that fed into broader concerns over Belgium's "deteriorating" competitiveness, with companies having to battle high labour costs and high energy prices. The commission said it is also concerned about the "trend reversal" of public debt. Spiralling age-related expenditure--among the highest in the EU--weighs on the public purse, the commission said, recommending that Belgium consider long-term measures, such as rising the retirement age. In March, Belgium agreed to a second round of austerity measures to take account of a possible contraction of its economy this year, with new savings of EUR1.82 billion ($2.39 billion) coming on top of a package of savings of EUR11.3 billion agreed last December. The commission will shortly issue country-specific recommendations as are part of the so-called European Semester of fiscal and economic surveillance at EU level. The process was adopted in 2011 as a means to deepen economic governance among the 27 EU member states and in particular within the common-currency area.